IMCO Invests $400 Million in Northvolt

Tommy Wilkes, Simon Jessop and Supantha Mukherjee of Reuters report Canadian pensions manager invests $400 million in Swedish battery maker Northvolt:

LONDON, June 20 (Reuters) - Canada's Investment Management Corporation of Ontario (IMCO) has invested $400 million in battery producer Northvolt, which will help the Swedish company expand production of lithium-ion batteries ahead of a possible initial public offering.

Northvolt, which counts BMW and Volkswagen among its investors, last year delivered its first battery cells from its gigafactory in Skelleftea in Sweden.

The group has raised more than $8 billion in debt and equity since 2017 in its bid to become Europe's biggest battery manufacturer, including $1.1 billion in convertible notes last year from multiple investors.

In its largest deal in Europe yet, IMCO has invested $400 million in Northvolt through convertible notes, it told Reuters.

"Northvolt really fits with a lot of the trends we are trying to invest in," Rossitsa Stoyanova, IMCO's Chief Investment Officer, said in an interview, referring to themes including the transition to a lower-carbon economy and the restructuring of global supply chains.

"Whether it (Northvolt) goes public or stays private, we've done our homework and we are happy with the investment."

A Northvolt spokesperson said the company hoped to reveal "the next steps in our financing plan in the near future".

IMCO put out a press release stating it has invested US$400 million to support Northvolt's mission to produce the world's greenest battery:

IMCO's Fundamental Equities and Global Infrastructure groups will jointly invest in leading Western-owned EV battery platform

TORONTO (June 20, 2023) – The Investment Management Corporation of Ontario ("IMCO") announced today that it is investing US$400 million in Northvolt AB ("Northvolt" or "the Company"), a leading integrated battery platform focused on the R&D, manufacturing, and recycling of sustainable battery cells and systems. The funds will enable Northvolt's planned expansion, aligned with IMCO and the Company's commitment to a deeply sustainable battery supply chain.

Northvolt's first gigafactory, located in northern Sweden, has already begun producing batteries in a sustainable manner using fossil-free electricity. Future gigafactory additions will support Northvolt's goal of delivering 150 GWh of annual production capacity by 2030. The Company intends to offer the world's greenest and lowest carbon footprint batteries, designed for use in electric vehicles ("EVs"), industrial systems and energy storage systems. With a strong focus on clean energy manufacturing, regional sourcing and closed-loop circularity via recycling, Northvolt also aims to offer the most sustainable batteries in the industry.

The joint investment by IMCO’s Fundamental Equities and Global Infrastructure is fueled by a priority both groups share to manage climate change and enable the global transition to a net zero emissions economy. This investment demonstrates substantive progress on IMCO's Climate Action Plan, which includes a commitment to invest 20 per cent of its assets under management in climate solutions by 2030.

"This innovative collaboration between IMCO's Fundamental Equities and Global Infrastructure teams is paving the way for meaningful capital deployment towards the energy transition," said Rossitsa Stoyanova, Chief Investment Officer of IMCO. "With this investment, we are tangibly delivering on our Climate Action Plan, while also strategically managing material ESG risks, ultimately generating sustainable long-term value for our clients."

"We're excited to partner with IMCO's Fundamental Equities and Global Infrastructure teams to build the future of clean energy together," said Alexander Hartman, CFO of Northvolt. "This investment fuels our expansion efforts, allowing us to further extend our global footprint and drive sustainable progress in our mission to deliver the world's greenest battery."

IMCO's Fundamental Equities strategy invests in select companies and works with the management teams over the long term to unlock shareholder value. Its mandate spans the full range of capital needs, from targeted liquid investments in public markets to a "Fundamental Plus" approach, such as the one taken with Northvolt, where IMCO identifies and pursues negotiated transactions for meaningful equity stakes in public and pre-public companies.

IMCO's Global Infrastructure portfolio invests in high-quality infrastructure assets across regions and sectors, notably in the energy transition, transportation, utilities, social and telecom sectors. With a strong focus on ESG, the portfolio enables IMCO's clients to take part in the global transition to a low-carbon economy. The investment in Northvolt grows the portfolio's existing exposure to the battery sector and reflects the infrastructure team's growing expertise in investing in clean energy storage platforms.

For more information on IMCO's investment in Northvolt, read our interview with the deal team.

I am going to be short and quick on this investment, it's a good long-term investment where IMCO is following OMERS which has already invested considerable amounts into Northvolt. 

In fact, it was two years ago that OMERS co-led a $2.75 billion equity funding in Northvolt. 

Last summer, OMERS Capital Markets increased its support for Northvolt:

Northvolt today announced the signing of a $1.1 billion convertible note to finance its expansion of battery cell and cathode material production in Europe to support the rapidly expanding demand for batteries.

Investors participating in the capital raise were AMF, AP funds 1-4 (via the co-owned company 4 to 1 Investments), ATP, Ava Investors, Baillie Gifford, Compagnia di San Paolo through Fondaco Growth/Fondaco Fund, Folksam Group, Goldman Sachs Asset Management, IMAS Foundation, Olympia Group, OMERS Capital Markets, PCS Holding, Swedbank Robur, TM Capital and Volkswagen Group.

Peter Carlsson, Co-Founder and CEO of Northvolt, commented: “We are proud and thankful for the support and trust from these world-class investors and partners. We will continue to work hard to deliver on the promise we have made to them to build the world’s greenest battery.”

With this capital raise, Northvolt has since 2017 secured close to $8 billion in equity and debt to deliver on its plans to establish a supply of sustainable batteries to enable the decarbonization of society.

Presently, the company is developing manufacturing capacity to deliver on $55 billion in orders from key customers, including BMW, Fluence, Scania, Volvo Cars, and Volkswagen Group. A key aspect to Northvolt’s strategy involves establishing in-house competences and presence throughout the battery value chain, including cathode material production and recycling. Through its large-scale recycling program, Northvolt intends to enable 50% of its raw material requirements to be sourced from recycled batteries by 2030.

“The combination of political decision making, customers committing even more firmly to the transition to electric vehicles, and a very rapid rise in consumer demand for cleaner products, has created a perfect storm for electrification,” said Peter Carlsson.

Northvolt produced its first battery cell at the Northvolt Ett gigafactory in Skellefteå,

Opens new window Sweden, just before New Year's Eve 2021, and made the first commercial deliveries from the factory during the spring of 2022.

Through 2021, around 1,800 people were recruited into Northvolt, and it continues to onboard around 150 people per month to support its plans. Key projects of the company include the continuous ramp up and expansion of Northvolt Ett, as well as the establishment of the Northvolt Volvo Cars joint venture gigafactory in Gothenburg

Opens new window, Sweden, and its third gigafactory, Northvolt Drei, in Heide, GermanyOpens new window. In parallel, a cathode factory, Northvolt Fem, is being established in Borlänge, Sweden.

Opens new window

Goldman Sachs Bank Europe SE, J.P. Morgan AG, and Morgan Stanley & Co. International plc act as joint placement agents to Northvolt.

And as the IMCO statement reads:

The joint investment by IMCO’s Fundamental Equities and Global Infrastructure is fueled by a priority both groups share to manage climate change and enable the global transition to a net zero emissions economy. This investment demonstrates substantive progress on IMCO's Climate Action Plan, which includes a commitment to invest 20 per cent of its assets under management in climate solutions by 2030.

So, to be really succinct, this investment checked off all the boxes and was a no-brainer for IMCO.

Below, five years since first announcing its ambitions, Northvolt has commenced commercial deliveries to European automotive customers from its first battery gigafactory, Northvolt Ett. As production ramps up, Northvolt Ett will begin to make a meaningful difference to the speed and nature of Europe’s shift to a cleaner future.